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Australian Small Businesses Represent the Largest Market Opportunity for Telco Carriers, Says IDC

NORTH SYDNEY – OCTOBER 28, 2002 – In serving the business market, telcos have tended to emphasise the large enterprise customer. The competition for these larger accounts is intensive given their relatively small number. However, a slowing economy and shrinking capital budgets have placed additional pressure on telcos selling to corporate customers.

Although few segments can escape the effects of an economic downturn, small businesses outnumber their larger counterparts, thus presenting carriers with a broader market opportunity, said Kourosh Ghassemi, IDC Research Manager, Small Business.

The IDC Small Business Telecommunications report provides insights into demand-side attitudes towards existing and emerging technologies and services, such as broadband access, mobile and wireless technologies, while also investigating the range of possibilities for service and equipment provisioning, including service provider, vendor and outsourcing selection criteria and preferences.

Telecom Services Usage

Small and medium organisations exhibit strong reliance on their telecommunications and IT systems across a growing array of distinct operational segments within their enterprise. Reliance on telecommunications and IT services was measured across operational segments on a scale of 1 to 5 (1 representing no reliance and 5 being total reliance). While customer service saw the highest reliance, sales and information management also saw high levels of usage with 3.5 and 3.4 means respectively.

IT and communications service management appears to be moving rapidly towards integration with over half of respondents fully integrating management and another significant portion seeing some overlap.

Service Provider Preferences

For current service provision, the incumbent carriers lead the way from a reliance perspective, but competitive players are indeed making headway. By and large, companies preferred to receive all of their communication services from the same provider. Reliability and pricing proved to be the greatest factors in evaluating service providers.

IT infrastructure and Network Security

The issue earning the most number of votes was security, followed by cost, compatibility and scalability. From a security standpoint, the most immediate threat was seen to come from the possible introduction of viruses. Data corruption, external hacking and disclosure of client data were also rated significant.

Acquisition and Spending Preferences

Small businesses show relatively strong penetration in basic communication services, their reliance on newer services however remains low. However the usage of higher tier technology such as video-conferencing, push web/multicast and multi-conferencing is increasing.

Outsourcing Trends

Outsourcing needs for both network and communications management remains relatively strong. For networking outsourcing close to 37% respondents outsourced while for communications outsourcing, 28% responded affirmative. The most widely used outsourcing partners are carriers while the rest of market is split between vendors and pure services (outsourcing) companies. Similar to the criteria used for service provider and vendor selection, small businesses choose their providers on the basis of reputation, price and support levels. Beyond these elemental criteria, many decision makers also noted the importance of outsourcers offering a total solutions framework.

Mobile/Wireless

Small businesses rely on mobile phones to stay in contact with customers, coworkers, and suppliers. Use of wireless phones varies by industry and is highest in sectors such real estate, construction and healthcare that employ mobile workers. An increasing minority of Australian small businesses are also beginning to embrace the use of smart handheld devices or personal digital assistants (PDAs) such as Palm or handspring products.

Broadband

Until very recently Australian small businesses have been slow in adopting high-speed access services that provide users with improved connectivity to the Internet. However in recent months, there has been significant changes in this trend. Competition for the small business customer will intensify in the coming months, carriers that offer a selection of products and services that are carefully tailored to the needs of the small businesses will be well positioned to gain market share. To retain the small business customer, carriers must provide timely and exemplary customer support. They must also ensure that all services can be delivered reliably as promised.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and eBusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts local and worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organisations, eBusiness companies and the financial community. Additional information can be found at www.idc.com.au